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Monthly Archives: June 2014

Victims of the Ponzi schemes of Bernard Madoff and Allen Stanford, two of the largest in US history, suffered setbacks on Monday as the US Supreme Court refused to hear appeals in two cases seeking to recoup more money for them

Victims of the Ponzi schemes of Bernard Madoff and Allen Stanford, two of the largest in US history, suffered setbacks on Monday as the USSupreme Court refused to hear appeals in two cases seeking to recoup more money for them.

In the Madoff case, the court rejected a request by Irving Picard, the trustee liquidating Bernard L. Madoff Investment Securities LLC, to review the dismissal of his claims against banks he accused of enabling Madoff’s fraud.

Separately, the court rejected a request by Ralph Janvey, a receiver unwinding Stanford’s businesses, to review a ruling that blocked him from pursuing claims against Stanford employees on behalf of the receivership’s creditors, not the businesses themselves. In both cases, lower courts concluded that Picard and Janvey lacked standing to bring their respective claims.

The Supreme Court did not give reasons for its decisions, which leave intact a June 2013 ruling in the Madoff case by the federal appeals court in New York, and an August 2013 ruling in the Stanford case by the federal appeals court in New Orleans.

Representatives for Picard and Janvey were not immediately available to comment. Picard has recovered about $9.82 billion for former Madoff customers, who he has estimated lost $17.5 billion of principal in a decades-long fraud uncovered in December 2008. A Ponzi scheme is one in which the early investors are usually paid high returns using money from later investors.

Picard had sued banks including JPMorgan Chase & Co, Britain’s HSBC Holdings Plc, Italy’s UniCredit SpA and Switzerland’s UBS AG over their dealings with Madoff. JPMorgan, which was Madoff’s main bank, was dropped from the case after reaching a $325 million settlement with Picard in January, part of a $2.6 billion global resolution of federal and private Madoff claims.

Stanford’s estimated $7.2 billion fraud was based on the sale of bogus certificates of deposit issued by Antigua-based Stanford International Bank to customers who thought the CDs were safe. The Ponzi scheme was uncovered in February 2009.

Janvey won court approval for an initial $55 million distribution to CD investors in April 2013. Madoff, 76, is serving a 150-year prison term after pleading guilty in March 2009. Stanford, 64, is serving a 110-year term following his jury conviction in March 2012. The cases are Picard v JPMorgan Chase & Co et al, USSupreme Court, No. 13-448; and Janvey v Alguire et al, USSupreme Court, No. 13-913.

We have been reliably informed that the amount agreed for the sale of Guiana Island by Grant Thornton is $60 million. This is the gross price before commissions, legal costs, development tax, appreciation tax, non- resident transfer tax, and mortgage discharge.

Grant Thornton have applied for relief from the taxes.

In 2008 Allen Stanford bought the 1,500-acre Guiana Island, off Antigua’s coast, for a reported US$22-million (Ref National Post July 27th 2012).

Guiana island was part of a parcel of lands that Stanford brought for a reported $63.5 million, the value of the land purchase was later artificially inflated to $3.1 billion to boost the bank’s revenues and hide financial losses.

Court-authorized professionals cleaning up the debris of one of the largest Ponzi schemes in U.S. history have been paid $64.2 million — more than twice the amount returned so far to victims — and are seeking more compensation.

Those professionals have recovered less than $300 million of the estimated $5.5 billion to $7 billion stolen from thousands of victims in Louisiana and in places as distant as Venezuela by convicted Houston swindler Robert Allen Stanford, whose company operated an office in Baton Rouge.

Attorneys, accountants and investigators searching since February 2009 for the mountains of money had been paid $64.2 million of the victims’ money recovered by the end of 2013.

Expenses incurred in the search by the court receivership team cost another $54.7 million, federal court records show.

That’s $118.9 million of victims’ money spent on the search for Stanford’s swindled dollars out of a total of $240.9 million recovered by Dec. 31 in the five-year effort.

Victims have received a combined $30 million — paid last year as a first distribution to some of the thousands of Stanford’s victims in Louisiana and other states. Another $25 million authorized by a judge for payment to victims has yet to be distributed.

Now, Dallas attorney Ralph S. Janvey, the court-appointed receiver in charge of the search, is asking U.S. District Judge David C. Godbey for permission to withdraw $5.8 million from a disputed pot of $17.3 million in fees for payment to members of his search team.

Don’t do it, a court-appointed examiner and the U.S. Securities and Exchange Commission have implored Godbey.

In Louisiana, some of Stanford’s victims have the same response.

Kathy and Louis Mier, of Zachary, were defrauded of $240,000 they invested with Stanford.

“Janvey, from day one, was trying to make money off us,” Kathy Mier, a 66-year-old retired schoolteacher, said. “We resent the fact that those lawyers take advantage of us. They’re fighting over our money.”

Richard Cochran, 82, of Baton Rouge, who declined to specify his total loss, noted that he received 21.7 percent of his investment in the form of interest payments before the SEC shut down Stanford’s operations in February 2009.

Now, the Korean War veteran said, Janvey’s team has demanded that he make payments into the Stanford receivership equal to that 21.7 percent.

Cochran said he refused, noting that compliance would increase his Stanford loss to 100 percent.

“Janvey said in the beginning all we’re going to get is pennies on the dollar,” Cochran recalled. “He’s making that come true.”

Added Cochran: “He (Janvey) probably ought to get what we get on our claims — 1 percent.”

In his filings in Dallas, Janvey has told the judge his team should receive $5.8 million of the disputed $17.3 million that Janvey contends has already been earned.

By the middle of March, Janvey reported to Godbey, the receivership had recovered another $23 million in stolen investor funds.

John J. Little, a Dallas attorney who has served as court-appointed examiner of the Stanford receivership for the past five years, argued June 9 that the judge should not release any portion of the $17.3 million to Janvey’s team.

“What we know at present is that the receiver and his professionals have not identified any significant Stanford assets or accounts that were not identified in the earliest days of the receivership,” Little said.

In addition, Little told Godbey, Janvey has not distributed $25 million of $55 million the judge authorized for pro rata payment last year to Stanford victims.

Janvey’s 2009 demand was opposed by both the SEC and the investors lucky enough not to have lost all their money.

The receiver’s motion for seizure of their remaining money also was denied by Godbey after SEC officials said commission policy is not to recover money from innocent fraud victims who lost more money than they received from a bogus investment operation.

But Janvey, spending recovered Stanford funds, appealed the decision to the 5th U.S. Circuit Court of Appeals in New Orleans, where he lost.

Both Little and the SEC now argue that the receivership’s record should be much closer to completion before the judge considers release of any of the $17.3 million withheld from Janvey’s team over the past five years.

“What has actually been distributed to Stanford’s investors — approximately $30 million — is less than half what has already been paid to the receiver’s professionals,” Little added.

Little said no more investor money should be paid to Janvey’s team until the total paid to the victims “significantly exceeds the amounts paid to the receiver and his professionals.”

Said SEC attorney David B. Reece: “The question is not whether the receiver and supporting professionals should receive compensation. The receiver’s team has been paid.”

Reece noted Janvey’s team has been paid $34 million more than Stanford’s victims.

“There is no reason to release further funds,” Reece told the judge.

Meanwhile, Stanford, 64, continues to maintain he is innocent of all charges for which he is serving a prison sentence of 110 years. He has filed an appeal in an effort to reverse his conviction.

The SEC and Godbey have concluded that Stanford and his companies operated a giant Ponzi scheme from the beginning of their operations.

Few, if any, investments are actually made in a Ponzi scheme. Instead, operators of the scheme skim most of the money that is put in by victims on the basis of false information provided by the criminals.

Some of the early investors receive small portions of their own money and that of later investors. While those investors believe the money is profit from actual operations, it is simply seed money designed to attract additional cash from people hearing of the program’s reputed success.

Stanford Group Co., insured by the federally chartered and industry-funded Securities Investor Protection Corp., received billions of dollars that victims were told would be secure at Stanford International Bank in the Caribbean nation of Antigua.

Instead, a Houston jury concluded, the majority of the money went to Stanford and several of his associates.

The SEC, in effect, directed SIPC to cover individual Stanford investor losses up to $500,000.

SIPC officials refused and won a judgment from a federal district judge in Washington, D.C. The SEC is appealing that decision.

A former Securities and Exchange Commission official and his law firm sought millions of dollars in new legal business in 2006 from financier R. Allen Stanford—during the same period of time the law firm had agreed to defend Stanford before the SEC, despite warnings from the SEC’s ethics counsel that any such representation would be illegal.

Stanford lavished lucrative legal business on former SEC enforcement officer Spencer C. Barasch and the Houston law firm of Andrews Kurth, where Barasch is a partner, to persuade them to defend him before the SEC. Initially, in 2005, Barasch and Andrews Kurth turned Stanford down when he asked them to represent him before the SEC, telling him that to do so would violate federal conflict-of-interest laws. In 2006, however, Barasch ignored the legal prohibition and agreed to do so anyway.

Confidential Andrews Kurth billing records show that in 2006, while Stanford was pressing Barasch and Andrews Kurth to defend him before the SEC, Stanford hired the law firm to represent him on seven other legal matters, adding an eighth in 2007. In addition, according to a former Andrews Kurth employee, Barasch told his fellow partners that they stood to earn as much as $2 million a year for defending Stanford before the SEC. Previously, Stanford had been only a relatively modest client for the law firm. Barasch and Andrews Kurth declined to comment for this story.

As the former chief enforcement officer of the SEC’s Fort Worth regional office, Barasch had overseen the agency’s monitoring of Stanford’s bank and brokerages. Between 1998 and 2005, Barasch had personally quashed six separate investigations of Stanford, according to government records. Officials at the SEC finally approved its first formal investigation of Stanford exactly one day after Barasch left the agency; examiners whom Barasch had stymied for years acted knowing they might succeed once he was gone. In 2009, the SEC and Justice Department would charge Stanford with masterminding a $7 billion Ponzi scheme, the second-largest in American history.

It was because of Barasch’s Stanford-related work at the SEC that Stanford wanted to hire Barasch so badly, according to interviews and records. Barasch had inside information on what had worked in the past to persuade his colleagues to shut down earlier investigations of Stanford. Barasch even boasted to one of Stanford’s top deputies about his access and influence with former colleagues he might be able to persuade once again, now from the outside, not to investigate the billionaire financier. Stanford was determined to do whatever he could to get Barasch “on board asap,” he wrote in an email to two of his deputies.

The 2006 SEC investigation would go on to reveal that Stanford’s international banking empire was one built on a foundation of financial fraud, deception, and bribery. It would take more than a decade after SEC examiners first uncovered evidence that he was engaged in a Ponzi scheme for Stanford to face criminal charges brought by a federal grand jury and the SEC. Stanford would be convicted by a federal jury in June 2012 and sentenced to a 110-year term in federal prison.

The new information in this story—that Stanford awarded Andrews Kurth with eight new legal representations while trying to persuade them to defend him before the SEC—provides the first explanation of why Barasch and Andrews Kurth would risk violating the law—and the consequences of doing so. A former employee of the firm told me that the prospect of lucrative legal work played a role in persuading some of the firm’s partners to ignore the law, and Andrews Kurth’s billing records, confidential emails, and other documents appear to partially confirm this.

This is good news. Antigua recently held elections and a new PM was elected the Honourable Gaston Brown. Mr Brown has signed the Memorandum of Agreement for the development of Guiana Island to Yida. The agreement by the Antigua government to allow the construction of a five five-star hotel will enable Grant Thornton to proceed with the sale to Guiana Island to Yida who will be keen to develop the island…..And in turn provide more money to be returned to victims from the sale.

ST JOHN’S, Antigua – One day after taking up the position of Prime Minister, Gaston Browne has signed a Memorandum of Agreement (MOA) with Yida International Investment Antigua Ltd to pave the way for a two-billion dollar investment project in this twin-island-state.

According to a government press statement, the MOA emerged after an eight-hour session of negotiations on Saturday, June 14.

Yida International is expected to invest over 200 million dollars annually in the economy over the next 10 years, as well as provide an Antigua & Barbuda presence in the People’s Republic of China to attract additional economically viable investments.

PM Browne stated, “I promised the people that my administration would bring the type of investments to the country that will transform Antigua & Barbuda into an economic powerhouse and I am serious about that promise. “This Memorandum of Agreement is the result of our determination to work in the interest of the people of the country,” he added.

Yida investors say the initiative will see the transformation of Guiana Island and surrounding lands via the construction of five five-star hotels.

Thirteen hundred (1,300) residential units, a casino, conference centre, 27-hole golf course, marina and landing facilities, as well as a commercial, retail and sports facility will also be built.

Attorney General and Minister of Justice and Legal Affairs, Immigration and Labour, Steadroy Benjamin, who witnessed the MOA, said the new Antigua & Barbuda Labour Party (ABLP) is about delivering for the people of Antigua & Barbuda.

Benjamin pointed out, “We were elected convincingly by the majority of the people of the country and we are committed to live up to our promises. One major promise is to provide jobs. This project will ensure that we move people from unemployed to being employed.”

During the lead up to the 2014 election, Prime Minister Browne vowed that his administration, when elected, would bring tangible investments that will generate much needed economic growth for the country.

Re.Claim No. ANUHCV 2009/0149 – In the Matter of Stanford International Bank Limited (in Liquidation), the International Business Corporation Act, Cap 222 of the Laws of Antigua and Barbuda, and an Application seeking the Court’s Directions, Marcus Wide and Hugh Dickson as Joint Liquidators of Stanford International Bank Limited (in Liquidation).

COViSAL is a group of more than 1,500 international families, including my own, victims of the pyramidal fraud perpetrated by R. Allen Stanford who have gathered together to defend our rights in the Coalicion Victimas de Stanford America Latina (“COVISAL”).

On February 17, 2014, the Joint Liquidators of Stanford International Bank Ltd. (“SIBL”), Marcus Wide and Hugh Dickson of Grant Thornton, sent a letter to Stanford’s victims alleging they received “preference” payments. Such a claim is based on the Joint Liquidators interpretation of the International Business Corporation Act (“IBCA”) of Antigua. We believe that the Joint Liquidators attempts to recover the alleged “preference” payments are flawed under Section 204 of the IBCA, and are not supported by the law. This IBCA Act applies to the corporation itself, its affiliates, directors, officers, and share holders, and not to depositors.

SIBL’s depositors were bound by agreement with the bank – Account Application, General Terms and Conditions and Terms of Deposit

SIBL’s depositors of CDs filled out and signed a Depositor’s Account Application subject to the Bank’s General Terms and Conditions and Terms of Deposit. The latter permitted depositors to make withdrawals from their CD accounts at any time up to 4 times a year. (See enclosed copies of bank’s documents). Depositors who made withdrawals in accordance with the Terms of Deposit where simply following guidelines set forth by SIBL and were in no way responding to preferential treatment……………….